All posts tagged Groupon

You should catch Groupon CEO Andrew Mason’s interview on “60 Minutes” if only for one reason: the moment when he flummoxes Leslie Stahl with a reference to “X-Men.”

Yup. Stahl asks Mason about the wisdom of an internal memo he sent defending Groupon’s business from naysayers, at a time when Groupon was barred from saying anything publicly about its business. Problem was, the memo became public and drew scrutiny from the SEC and from Groupon’s critics.

Among the series of distractions ahead of Groupon’s IPO last month was the Mason Memo. Newly disclosed documents shed light on how Groupon was forced to explain the memo to the SEC.

Some background: Back in August, our corporate cousin Kara Swisher at All Things D published an email message that had been sent to Groupon employees from CEO Andrew Mason. In the email, Mason disparaged what he said was ridiculous speculation that Groupon is a rickety business destined for the slaughterhouse. Mason laid out some financial metrics and trends to explain why Groupon was in good shape.

Problem was, Groupon already had filed its IPO paperwork with the SEC. And once that happens, neither the company nor its executives can do anything seen as possibly whetting investors’ appetite for the IPO….

According to just-disclosedletters Groupon sent to the SEC in September, the securities regulator had at least two phone conversations with Groupon’s lawyers, who were asked to provide a detailed legal rationale for why Mason’s email didn’t violate IPO rules. The SEC also asked what Groupon did to make sure Mason’s email didn’t leak out in the first place, which it of course did.

“Groupon’s ‘get big fast’ strategy to dominate the local-deals business is bold, potentially revolutionary and wrought with organizational challenges. Groupon has grown to over 10,000 employees in three years and is now refining its business model, trying to drive profitability. In our view, the company’s current $15B valuation already discounts several years of hyper growth and margin expansion, which may not materialize as expected,” Stifel writes.

One of Deal Journal’s favorite pastimes is checking in on analyst reports after the 40 days after an IPO.

Reuters

Why? Because it’s the end of the “quiet period” for the underwriters and their analysts can issue research notes. And that means today is our first peak at the research from the firms that underwrote Groupon.

Groupon’s shares got a nice bounce yesterday ahead of what some may have expected to be a round of praise, as often happens. Instead the firms that underwrote Groupon are handing out backhanded compliments, and shares are dropping 4.5% to $22.27 after earlier slumping even harder.

Of the 15 ratings so far launched on Groupon, 10 are in neutral.

The IPO had 14 firms toiling on it, five of which have given Groupon the equivalent of a buy and six have given it neutrals. All the banks left off Groupon’s IPO have issued neutrals.

Are Groupon shares getting a jolt as the Wall Street research floodgates prepare to open?

Our Journal colleagues earlier this year wrote about the phenomenon of runups in stock prices of newly public companies, just before the research arms of Wall Street banks begin publishing research about the companies. (Banks have to take a 40-day breather before they issue stock recommendations on the companies they shepherd into public markets.)

Tomorrow, the research quiet period ends for Groupon. And just like magic, the company’s stock price is getting an unexpected lift today.

It’s not quite the unhappy surprise of a money-market fund “breaking the buck” in 2008, but Groupon’s stock price has broken below its IPO price. This is embarrassing, folks.

Groupon’s IPO price was $20 a share. The stock price yesterday was flirting around that level, but managed to stay slightly above the breakeven point. Today, shares are sinking about 6.5% to $18.77 at last look. Groupon’s stock price has been as high as $31.14 since Groupon shares first started trading on Nov. 4.

U.S. options exchanges are gearing up to list Groupon options beginning Monday.

CBOE and its electronic sister, C2, will list Groupon puts and calls, and the other seven options exchanges are likely to follow suit. The CBOE says strike prices will be listed in $1 increments from $15 to $35, with monthly expirations through January, as well as April and July.

For Groupon valuation skeptics, put options provide another means to short the stock.

Wall Street bankers did yeoman’s work pushing through Groupon’s IPO. Now, the bills are coming due.

From their work on last week’s IPO of Groupon, the 14 underwriters who handled the $700 million stock sale will split at least $42 million in fees and underwriting discounts, according to a Groupon regulatory filing this week. The fees are about 6% of the total IPO proceeds, a typical slice for an initial public offering.

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Dealpolitik is Ronald Barusch's strategic look at deals currently making the headlines as well as the major forces at work in the deal-making world. He was a M&A lawyer with Skadden, Arps, Slate, Meagher & Flom for over 30 years. He retired in 2010 after 25 years as a partner at the firm. Click here for his current and archived columns.